2012 home resales best in 5 years

They dipped in December, but analysts blame budget, tax jitters

— U.S. sales of previously owned homes dipped in December from November, in part because of a limited supply of available homes. But for all of 2012, sales rose to their highest level in five years.

The National Association of Realtors said Tuesday that sales declined in December to an annual rate of 4.94 million. That’s down from a rate of 4.99 million in November, which was revised lower but was still the highest in three years.

Total sales of existing homes last year increased to 4.65 million. That’s 9.2 percent higher than 2011 and the most since 2007. Sales finished below the roughly 5.5 million that’s consistent with a healthy market.

Buyers’ concerns about the federal budget negotiations and the potential for tax increases may be at least partially behind December’s sales decline, wrote Millan Mulraine, macro strategist at TD Securities, in a research note.

“Given this, we anticipate that sales activity could rebound in January following the tax deal, given the very supportive buying conditions and the increasing incentive for first-time buyers (who are currently sitting on the fence) to slowly move into the market as prices begin to firm,” Mulraine wrote.

Sales of new and previously owned homes in Arkansas rose 5.85 percent in October, compared with October 2011, the Arkansas Realtors Association said. The sales numbers for November and December have not been released.

Stable hiring, record-low mortgage rates and a tight supply of homes have helped raise sales and prices in most U.S. markets.

“We remain convinced that the housing recovery is well under way and should continue through 2013,” said Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage.

The market is being held back by the shrinking supply of homes for sale. The inventory of homes on the market dropped to 1.82 million in December, the lowest in 12 years.

“This isn’t worrisome at all,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “For the first time in a while, it looks like it’s a sellers’ market as much as it’s a buyers’ market. I suspect prices and sales will go up again in 2013.”

At the current sales pace, it would take 4.4 months to sell those houses, the lowest since May 2005, compared with 4.8 months at the end of November.

“The only concern going into 2013 is the inventory situation,” Lawrence Yun, National Association of Realtors chief economist, said at a news conference Tuesday as the figures were released. “Price increases are almost guaranteed going into 2013,” Yun said, adding that the group’s projection of a 4 percent to 5 percent increase this year may be exceeded.

First-time buyers, who are critical to a housing recovery, made up only 30 percent of sales in December. That’s down slightly from a year ago and well below the 40 percent that is typical in a healthy market.

Since the housing bubble burst six years ago, banks have adopted tighter credit standards and are requiring larger down payments.

That’sleft many would-be buyers unable to qualify for the lowest mortgage rates on record.

The rate on the 30-year fixed mortgage averaged 3.66 percent in 2012, the lowest annual average in 65 years, according to Freddie Mac, the Federal Home Loan Mortgage Corp.

Sales are rising faster for more-expensive homes, the Realtors group said. Sales of homes priced $1 million or more surged 62 percent in 2012, while sales of homes below $100,000 fell 17 percent.

Home prices rose 7.4 percent annually in November, real estate data provider CoreLogic said last week.That’s the biggest annual increase since 2006. CoreLogic forecasts that home prices will rise 6 percent nationally this year.

Rising demand for homes has persuaded builders to step up construction, which adds to economic growth and hiring.

U.S. builders started work on homes in December at the fastest pace in 4 1/2 years, the government said last week. And builders finished 2012 as their best year for residential construction since the early stages of the housing crisis.

The gains in home building pushed construction hiring up in December by 30,000 jobs - the most in 15 months.

Information for this article was contributed by Christopher S. Rugaber of The Associated Press; by Alex Kowalski and Chris Middleton of Bloomberg News; and by Ruth Mantell of MarketWatch.

Front Section, Pages 1 on 01/23/2013

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